EDF calls for urgent EU electricity market reform

24 February 2016

French utility EDF is calling for "rapid and radical reform" of Europe's electricity market structure to allow for future investments in new generating capacity. This is needed, it says, to "face up to current challenges of the energy transition and to consumers' expectations".

EDF chairman and CEO Jean-Bernard Lévy said in a statement yesterday, "Through its energy mix and its significant investment efforts, EDF actively supports the work undertaken by the European Commission in the energy sector, and calls for a redefinition of the European electricity market model in order to reconcile consumers' interests with the transition to a low carbon world."

The company said it sees "two key actions" that should be prioritized in reforming the market model in order to provide a low-carbon electricity mix in Europe. Firstly, it calls for a "significant" floor price for carbon dioxide to be established within the EU to encourage investment in generation facilities using non-fossil fuels. According to EDF, this floor price should be set at a minimum of €30 to €40 ($33 to $44) per tonne.

Secondly, EDF seeks the promotion of "effective capacity mechanisms so as to ensure that the continent has long-term security of energy supply, despite market turbulence, and in the best interest of all customers".

On 16 February, while presenting EDF's results for 2015, Lévy noted the current problems faced in the European electricity market: low electricity prices, overcapacity due to sluggish growth and renewable energy development. Wholesale electricity prices, he said, have dropped by 30% in EU markets over the past year. "Operators today can barely cover their variable costs with this market model," Lévy said. "Energy supply is secured, but no operator is able to invest in building new means of production without public subsidies to support them."

"It is now urgent to reform the current market and to adapt it to the energy transition, by quickly implementing capacity mechanisms in order to secure energy supply, by setting a European carbon price which will be in line with the commitments made by Europe at COP21, and by introducing a new and enhanced regulation," Lévy said.

He said the current EU carbon market - the Emissions Trading System - is "at a level which is not meaningful to the energy mix".

Lévy said that EDF believes there is an urgent need for the European Union, and for many countries within Europe, to look again at the way that deregulation and competition have been implemented. All investments in electricity generation are currently only driven by regulation and not by market, Lévy said.

"The market design guidelines that are expected from the EU by the end of the year are an essential part of what should be the energy industry in the future," he said.